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Wickes - Travis Perkins Spin Off


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I've read an article over the weekend detailing the spin-off of Wickes from Travis Perkins.  The Latter has an AGM on Tuesday and if the proposal is agreed TPK will give existing shareholders a 1-for-1 ahead holding in the newly created company.  If agreed, shares in the newly listed company will be available to trade from the open on 29th April. 

For those that aren't aware, Wickes is a DIY retailer in competition with B&Q and homebase.  The strong sentiment in DIY shares has been justified over the past 12 months, lockdown has made many turn to home renovation or repairs.  For this reason (a compelling theme), I think many retail investors of TPK will likely hold onto their new Wickes shares; there certainly won't be many private investors facing liquidity issues under current circumstances.  Selling Wickes to raise cash (similar to a special dividend) is unlikely.

What many have overlooked, certainly I can't see any coverage, is the ownership of TPK by institutional investors, the "smart money". TPK's significant shareholders currently have >40% of the current listing, many approaching the 5% mark. It's my belief that very few of these institutions will hold onto Wickes.

These companies would have built up their positions in TPK as a conglomerate in building supplies play.  A position in wickes will likely skew their positions (admittedly, insignificantly), most of the big investors would have built their positions to take advantage of consumer appetites under lockdown already (if at all). The listing of Wickes is a unique case, should it get approval tomorrow, I think it likely the price will fall in the short to medium term.  As with all flotations, we'll see a price rise in the short term, the big players will hold to see how much they can realise from their special dividend before offloading. 

A short case? What are your thoughts?

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